The US stock market experienced another wild roller coaster ride on December 28 after three massive buy orders roiled Wall Street in late-afternoon trading.
The Dow Jones Industrial Average closed at 23,062, down 76 points from the previous day’s stunning 800-point spike.
Finance blog ZeroHedge opined that institutional investors — specifically, pension funds executing year-end reallocation trades — are behind the market’s erratic intraday fluctuations.
The NYSE Tick jumped several times in the afternoon following the massive buy programs. The Tick Index is an indicator used by day traders to assess the overall market sentiment at a given point in time.
‘Is This a Fake Breakout?’
At precisely 2:39 pm, a TICK print of 1,775 was registered, signifying the biggest buy program of all time. Now, the only question — is this the real “pension buying” deal… or someone trying to fake out the algos into buying and trapped shorts into covering?
While we don’t know if it is indeed pensions, or someone merely frontrunning today’s forced buying…at precisely 2:05 pm, the NYSE TICK — an indicator showing relative strength of buy and sell orders — hit 1,735, the second-highest reading on record.
The stock market has been extremely erratic recently, with analysts speculating that the following factors are artificially inflating or deflating stock prices:
- Federal Reserve raising interest rates for the fourth time in 2018
- Concerns over a global recession
- Market manipulation by institutional investors.
Analyst: $60B Pension Buys Buoyed Market
Pravit Chintawongvanich — an equities derivatives strategist at Wells Fargo — believes that a $60 billion buying spree by pension funds was behind the monster Dec. 27 rally, Bloomberg reported:
Institutional investors with large holdings in stocks and bonds use the end-of-quarter period to balance out holdings, adding to losers and cutting on winners.
This time, they went big on U.S. large and small caps, adding $35 billion and $21 billion to indexes that are set to post the worst month since 2009. Money got pulled from fixed income that’s outperformed stocks.
There is always rampant speculation that the stock market is being manipulated by institutional investors and some deep-pocketed individual investors. In fact, most people accept this as a reality.
What Is the Impact of Bitcoin Whales?
Similarly, in the crypto world, there are constant rumors that bitcoin whales (i.e., individuals or entities who hold large amounts of BTC) are manipulating prices by buying up or dumping large stashes at a time.
But unlike in the equity markets, research suggests that bitcoin whales have a stabilizing effect on the crypto ecosystem.
According to data compiled by blockchain analytics firm Chainalysis, bitcoin whales are a heterogeneous group, and more than half are not active traders; they’re long-term hodlers.
The report also suggests that the few bitcoin whales who do trade generally tend to buy — not sell — during market slumps.
One example of a long-term holder is tech billionaire Tim Draper. As CCN.com reported, Draper is still holding the entire bitcoin stash he acquired in late-2014, when he purchased about 40,000 bitcoins at a federal auction for $600 apiece.
Many skeptics are gleefully laughing at crypto evangelists like Draper, saying they’re sitting on a losing investment. So why would a savvy, Stanford-educated venture capitalist with a Harvard MBA still be hodling his massive bitcoin stash?
Maybe it’s because he believes the bitcoin price will rocket to $250,000 by 2022. And nothing has happened to change his outlook. “They’re going to think you’re crazy, but believe it,” Draper gushed. “It’s happening and it’s going to be awesome!”
So is Tim Draper a madman or a genius? Only time will tell.
Featured image from Shutterstock.